Thursday, December 20, 2012

European Commission to issue Statement of Objections against Samsung over FRAND SEPs

Samsung will soon receive a Statement of Objections from the European Commission over its suspected abuse of FRAND-pledged standard-essential patents against Apple. And as I'll explain further below (click here to go to that part directly if wou you wish), Google undoubtedly faces the very same measure, with the only major difference being that there could always be a comprehensive EU-Google settlement that also covers its search engine while Samsung's case is only about SEPs at this stage. (They recently got fined by the EU as part of a display technology cartel.)

The moral of the story: Don't mess with Brussels. Especially not with FRAND-pledged standard-essential patents while European Commission Vice President Joaquín Almunia is in charge of competition enforcement for the 27-member bloc with more than 500 million inhabitants and the world's largest single market.

"Others before [Samsung's counsel] have made the mistake of underestimating the European Commission's resolve and agility in times of need. A Statement of Objections requires a fair amount of legal work and a vote by the commissioners, but if a solid legal theory based on a robust body of evidence is in place, swift action is possible and has happened before, contrary to a stereotype of a huge bureaucracy that takes its time and always looks for the path of least resistance."

Reuters, Bloomberg and IDG report that at today's press conference, the Vice President, who left no doubt whatsoever, in multiple public speeches during the course of this year, about the emphasis he and his staff place on the need to fight and prevent FRAND SEP abuse, announced that Europe's top competition agency is soon going to adopt such a Statement of Objections (briefly and commonly referred to as an "SO" in the antitrust community, which I'm a part of) against Samsung.

After news broke two days ago (Tuesday, December 18, 2012) of Samsung's unilateral withdrawal of all SEP-based injunction requests against Apple in Europe, I wrote this blog post entitled "Win for the EU: Samsung drops all requests for standards-based sales bans against Apple in Europe". Please excuse this see-I-told-you-so part, but it's inevitable because at a time when the bulk of all reports misstated the scope of (and motivation behind) Samsung's withdrawals (referring to withdrawals of entire lawsuits, while it was only a withdrawal of one remedy with respect to one class of patents), this blog provided some rapid analysis that has been validated within a record time of about 48 hours:

I pointed out the limited scope of the withdrawal (Samsung is still suing Apple in Europe, still seeking injunctions based on non-SEPs, and still seeking monetary compensation with a view to SEPs) and the fact that it precisely matched the core concerns of the European Commission and was, since there were no signs of a settlement (no joint announcement, no concessions on Apple's part), clearly attributable to the EU's efforts. Samsung suggested it was suddenly viewing SEP injunctions as an issue for consumers (with doesn't match with the fact that it is still pursuing such injunctions on three other continents).

I noted that "[t]he next step for the European Commission would have been (without a firm deadline under the law) to issue a Statement of Objections (SO)" and clarified that it was "unclear at [that] point" whether there was a deal in place under which the withdrawals would take care of the EU antitrust investigation. Let me quote a whole paragraph from two days ago:

"What's unclear at this point is whether Samsung has a gentlemen's agreement with the European Commission that the antitrust investigation will be dropped (without remedies, or maybe with only soft remedies) if it withdraws its European requests for injunctions (again, it does not have to, and apparently has not, withdraw its pursuit of FRAND compensation). If there is such an agreement, then the European Commission will soon comment favorably on Samsung's announcement and close the case. If there is no such agreement, then the investigation may continue and Samsung may still be fined, but it would certainly be in much better shape than if it had carried on with its enforcement, especially in Germany."

The Commission didn't welcome it as a solution but merely took note and stressed that its investigations were ongoing (for example, the New York Times quoted a Commission spokesman). With today's announcement we know that these investigations are not merely ongoing but entering the next stage. An SO is always a formal requirement before sanctions (with a hearing taking place in between).

The New York Times article I just linked to also quoted me as saying that "[i]t's not just that the plot is thickening; in my view, there can be no other plausible view than that there is pressure from Brussels". Under the now-validated headline that "Samsung's Apple Action May Not Be Quite So Selfless", the Wall Street Journal pointed to my Tuesday blog post and quoted me (from a telephone interview) as saying that "I attended these [Mannheim Apple v. Samsung SEP] trials, there was a lot of argument in court with the judge over a possible European intervention in the case". (The quote at the start of the article about Samsung possibly underestimating the Commission's speed and resolve was from one of the related trial reports.) I was also quoted on the reasons for Samsung's unilateral but not completely voluntary action by the Guardian and other media. I can't list them all here, but you can see that at least three leading English-speaking newspapers quoted my theories. By contrast, there were numerous analyst comments that came up with theories that have not only been proven wrong today but were demonstrably unrealistic even before today's EU announcement. For example, any theories of this meaning a settlement made no sense in light of the fact that there was no joint Apple-Samsung announcement and no deal under which Apple would have made concessions. It also made no sense in light of the limited scope. And at least one commentator even believed that there was a factual connection between Judge Koh's denial of a U.S. preliminary injunction against Samsung over non-SEPs and Samsung's announcement a few hours later of the European withdrawal of SEP lawsuits because Samsung thought it couldn't win its European lawsuits after the U.S. ruling. A U.S. non-SEP case and an EU SEP case are so unrelated that anyone who knows the subject could see that someone was making a connection where there wasn't one. Many reporters saw that there was no likely connection. In particular, the Los Angeles Times, which talked to me about both the U.S. lawsuit and the EU situation and quoted me on the U.S. part of the story, accurately noted that "[s]everal observers [...] said the timing was probably a coincidence and not a sign that either side is about to call a truce or push for a settlement".

Now that I'm about to deactivate my see-I-told-you-so mode (even though it's an efficient way to simply explain what's going on and what was previously misunderstood by some), I'd also like to remind everyone that in early November 2011, when it became known that the European Commission was conducting informal, preliminary investigations, I pointed out that the Commission's confirmation of questionnaires being sent to Samsung and Apple didn't mean that Apple was a target. Instead, I said from the get-go that Apple was a victim or witness in this. At the time, major news agencies including Bloomberg and Reuters added my commentary to their articles. Now, more than a year later, the EU is about to issue an SO against Samsung, and there's still no sign of investigations of wrongdoing by Apple. (I don't blame reporters for the fact that in that case, the first EU statement was potentially misleading, but for me it was easy to interpret it correctly in November 2011 because the scope of the preliminary investigations was, according to the EU statement, about wireless standards, over which Apple never sued anyone).

OK. No more "See I Told You So" in this post. But now I'll point out to what might happen next.

The European Commission clarified today that Samsung's withdrawal is not enough: the fact that it may have harmed competition is enough to issue an SO and to possibly order fines regardless. Vice President Almunia said: "The [requests for] injunctions in the Apple-Samsung case were launched; it was not only a threat." Don't forget that there's another large company out there that must take note of this: Google, the owner and micromanager of Motorola Mobility. Motorola Mobility went even further in the pursuit of injunctions than Samsung because it actually won some against Apple and Microsoft in Germany (Samsung had not yet won anything, though it was pursuing this aggressively in a handful of EU member states), and it was temporarily even enforcing one against Apple (because of the intervention of an appeals court, only for about a day or so, but it wanted to do this for as long as possible). Google (Motorola) continues to try everything it can to fight a U.S. anti-enforcement injunction that prevented it from enforcing a couple of German H.264 SEP injunctions against Microsoft.

Given these hard facts, I predict that Google (Motorola) will, unless there's a comprehensive antitrust settlement with Google that also involves antitrust issues concerning its search engine, also receive an SO, not long after or maybe simultaneously with Samsung.

If you'd like to be updated on the smartphone patent disputes and other intellectual property matters I cover, please subscribe to my RSS feed (in the right-hand column) and/or follow me on Twitter @FOSSpatents and Google+.

Links

Subscribe To

Followers

Total Pageviews

Search This Blog

About Me

Florian Mueller used to be an award-winning intellectual property activist. His 30 years of software industry expertise span different market segments (games, education, productivity and infrastructure software), diverse business models, and technical and commercial areas of responsibility. In recent years, Florian advised a diversity of clients on the patent wars surrounding mobile devices, and on their economic and technical implications. (In order to avoid conflicts of interest, Florian does not hold or initiate transactions in any technology stocks or derivatives thereof, except that he is long AAPL.) He is now developing games for smartphones and tablet computers.